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Pep Boys Obtains Term Loan

Pep Boys - Manny, Moe & Jack , on October 12th, announced the completion of the amended and restated term loan facility worth $200 million at LIBOR (with a floor of 1.25%) plus 3.75%, due October 11, 2018. The facility has been secured by 142 stores owned by the company. Pep Boys also swapped the interest rate on $100 million of this term loan facility to a fixed rate of 1.855% from the variable LIBOR portion of the interest payment.

The company will utilize the proceeds from the increased facility along with the cash in hand for the payment of $148 million of 7.5% senior subordinated notes due 2014. The remaining amount will be utilized to settle the outstanding interest rate swap of around $8 million.

The company reduced its long-term debt by $95 million, thus achieving its targeted long-term debt reduction of roughly $100 million. The company also reduced its annual interest expense by $11 million.

Pep Boys, in the second quarter of 2012 (ended July 28, 2012), recorded a significant increase in its profit (excluding merger termination fees and severance costs) to $76.7 million or $1.43 per share from $11.9 million or 22 cents in the prior-year comparable quarter. The results surpassed the Zacks Consensus Estimate of $1.28 per share.

Total revenues inched up 0.6% to $525.7 million from $522.6 million in the year-ago quarter, matching the Zacks Consensus Estimate. The growth was mainly driven by the improvement in the company’s service business.

Pep Boys, based in Philadelphia, supplies tires, batteries, new and remanufactured parts for vehicles, chemicals and maintenance items, fashion, electronic, and performance accessories. It also provides non-automotive merchandise such as generators, power tools and personal transportation products.

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